Vancouver, BC - May 10, 2016 - Klondex Mines Ltd. (TSX: KDX; NYSE MKT: KLDX) ("Klondex", the "Company", "we", "our", or "us" - https://www.commodity-tv.net/c/mid,1323,Interviews/?v=296186 ) is pleased to announce its operational and financial results for the first quarter of 2016 as well as recent developments. This press release should be read in conjunction with our first quarter 2016 interim financial statements and related management's discussion & analysis ("MD&A"), which are available on our website (www.klondexmines.com), on SEDAR (www.sedar.com), and on EDGAR (www.sec.gov). All dollar amounts included in this press release are expressed in thousands of United States dollars, unless otherwise noted, and are based on our financial statements and MD&A, which has been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. References to "Notes" refers to the notes contained in the financial statements.

First Quarter 2016 Highlights

• Health, Safety, and Environmental - No lost-time injuries or environmental incidents at Fire Creek, Midas, or Rice Lake; Environmental Assessment was approved by the BLM at Fire Creek.

• Acquisition of Rice Lake - Completed the acquisition of Rice Lake located in Manitoba, Canada (as well as certain other assets) for $32.0 million and commenced a number of important exploration and project development activities at the project.

• Cash Flows and Liquidity - Entered into a $25.0 million secured revolving facility agreement with Investec Bank PLC, bolstering our financial strength and liquidity. Quarter end cash balance of $30.9 million, working capital of $31.6 million (ratio of 2.0:1), and total liquidity of $56.6 million when including the Revolver availability.

• Capital Expenditures - Spent $7.0 million at Fire Creek, $5.1 million at Midas, $2.1 million at Rice Lake, and $0.3 million at corporate for total capital spending of $14.5 million.

Recent 2016 Developments

• Forward Sales Contracts - In April 2016, entered into fixed forward spot trades covering 67,600 ounces of gold at an average price of $1,258 per ounce and 798,500 ounces of silver at an average price of $16.71 per ounce, both of which will be physically delivered into during the second, third, and fourth quarters of 2016.

Mr. Paul Huet, President and CEO commented, "Our operational performance for the first quarter of 2016 was in line with our mine plans. We are doing the necessary development work to position us to achieve our annual production and cost targets.” Mr. Huet continued, “Additionally, our strong operational and financial performance over the last two years has been instrumental in creating a very strong balance sheet. With that, and increased certainty in our near-term metal price environment, we have made the choice to increase our capital spending this year in Nevada by $10 million to aggressively develop and explore our core assets. We believe this is the best use of our capital in the current metal price environment."

2016 Full Year Outlook

Nevada Operations

We are reiterating our targeted annual production costs and GEO production, which is expected to be weighted approximately 40%-45% in the first-half of 2016 and 55%-60% in the second-half of 2016. Our 2016 GEO production and grades are expected to progressively increase from the first quarter to the fourth quarter following the completion of planned first-half development and silling activities. Entering into forward sales contracts has increased our planned operating cash flows and as a result we have increased our annual capital expenditure projections from our original estimate by $10.0 million to $55.0 million to $60.0 million. The additional capital is expected to be spent largely on non-sustaining exploration and advanced development. Consequently, we are also revising our all-in costs per gold ounce sold (excluding Rice Lake) by $75 to $1,025 to $1,075. The following table outlines our annual guidance and includes all-in costs per gold ounce sold measures exclusive of Rice Lake, which was acquired during the first quarter of 2016 after the release of our full-year guidance:

(1) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the projected average realized gold price per ounce by the projected average realized silver price per ounce expected to be received by us in 2016.

(2)See Non-IFRS Performance Measures section in this Press Release.

Consolidated Financial Results of Operations

Three months ended March 31,

2016

2015

Revenues

$

35,469

$

38,091

Cost of sales

Production costs

21,347

21,653

Depreciation and depletion

5,768

7,730

Gross profit

8,354

8,708

General and administrative expenses

3,352

2,775

Income from operations

5,002

5,933

(Loss) gain on derivative, net

(1,171

)

179

Finance charges, net

(1,301

)

(2,136

)

Foreign currency (loss) gain, net

(2,339

)

7,664

Business acquisition costs

(683

)

—

Other, net

119

—

(Loss) income before tax

(373

)

11,640

Income tax expense

733

3,529

Net (loss) income

$

(1,106

)

$

8,111

Net (loss) income per share - basic

$

(0.01

)

$

0.06

During the first quarter of 2016, Fire Creek and Midas sold 26,964 gold ounces and 325,274 silver ounces. First quarter 2016 Revenues were impacted by lower average realized prices ($1,138 per gold ounce and $14.72 per silver ounce) and lower grades attributable to planned development. Production costs were in-line with expectations given the first quarter mine plan. Depreciation and depletion decreased from the prior year quarter due to lower per ounce amounts from increased resource bases. General and administrative expenses increased in 2016 due to increased staff levels at the corporate office and severance payments. Finance charges were primarily related to gold purchase agreement, finance leases, an the promissory note pursuant to the Rice Lake acquisition, which also resulted in business acquisition costs.

Liquidity and Capital Resources

Three months ended March 31,

2016

2015

Net cash provided by operating activities

$

4,377

$

4,488

Net cash used in investing activities

(34,499

)

(5,560

)

Net cash provided by (used in) financing activities

1,235

(258

)

Effect of foreign exchange on cash balances

644

(902

)

Net decrease in cash

(28,243

)

(2,232

)

Cash, beginning of period

59,097

45,488

Cash, end of period

$

30,854

$

43,256

We generated $4.4 million of net operating cash flows and were provided $1.2 million from financing cash flows due to the exercise of share options and warrants; cash used in investing activities totaled $34.5 million ($20.0 million for Rice Lake acquisition and $14.5 million of capital expenditures). We maintained our strong financial position and as of March 31, 2016, had total liquidity of $56.6 million, consisting of $31.6 million in working capital and $25.0 million of borrowing availability under our March 2016 Revolver.

First Quarter 2016 Summary Operational Results

Three months ended March 31, 2016

Three months ended March 31, 2015

Change

Mine operations

Fire Creek

Midas

Total

Ore tons milled

32,742

41,013

73,755

57,664

16,091

Average gold mill head grade (oz/ton)

0.69

0.12

0.38

0.50

(0.12

)

Average silver mill head grade (oz/ton)

0.92

7.98

4.84

6.78

(1.94

)

Average gold equivalent mill head grade (oz/ton)(1)

0.70

0.22

0.44

0.60

(0.16

)

Average gold recovery rate (%)

93.6

%

93.5

%

93.6

%

94.0

%

(0.4

%)

Average silver recovery rate (%)

88.6

%

90.6

%

90.4

%

90.7

%

(0.3

%)

Gold produced (ounces)

21,219

4,743

25,962

27,225

(1,263

)

Silver produced (ounces)

26,693

296,429

323,122

354,455

(31,333

)

Gold equivalent produced(ounces)(1)

21,574

8,476

30,142

32,203

(2,061

)

Gold sold (ounces)

18,545

8,419

26,964

27,135

(171

)

Silver sold (ounces)

34,845

290,429

325,274

304,557

20,717

Gold equivalent sold(ounces)(1)

19,009

12,077

31,172

31,412

(240

)

Revenues and realized prices

Gold revenue (000s)

$

20,863

$

9,819

$

30,682

$

32,907

$

(2,225

)

Silver revenue (000s)

522

4,265

4,787

5,184

(397

)

Total revenues (000s)

$

21,385

$

14,084

$

35,469

$

38,091

$

(2,622

)

Average realized gold price ($/oz)

$

1,125

$

1,166

$

1,138

$

1,213

$

(75

)

Average realized silver price ($/oz)

$

14.98

$

14.69

$

14.72

$

17.02

$

(2.30

)

Non-IFRS Measures

Production cash costs per GEO sold(2)

$

455

$

1,051

$

685

$

689

$

(4

)

All-in sustaining costs per gold ounce sold(2)

n/a

n/a

$

1,070

$

788

$

282

All-in costs per gold ounce sold (excluding Rice Lake)(2)

n/a

n/a

$

1,202

$

1,041

$

161

All-in sustaining costs per gold ounce sold (including Rice Lake)(2)

n/a

n/a

$

1,282

$

1,041

$

241

(1)Gold equivalent ounces produced (or gold equivalent grades per ton) are the gold ounces produced (or gold grades) plus the silver ounces produced (or silver grades) divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Measures section of this Press Release for additional detail.

(2)This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.

Our 2016 operating targets anticipate GEO production and grades progressively increasing throughout the year which we expect will result in lower second half cost measures compared to the first quarter of 2016. Fire Creek and Midas's first quarter 2016 results were in-line with management expectations and included the sale of 31,172 GEOs, consisting of 26,964 gold ounces and 325,274 silver ounces. The 73,755 ore tons milled (average of 810 tons per day) represented a quarterly record as the mining rate has increased from prior period levels to support our production growth and accommodate the planned lower ore grades in the first half of the year. Lower grades during the first quarter of 2016 at Fire Creek were the result of increased silling activities to open up additional working faces and provide future flexibility in the mine plan. At Midas, planned ore development activities continued which resulted in mining areas with grades consistent with those of the fourth quarter 2015.

Rice Lake Project

In March 2016, we received approval to recommence mining and milling operations from the Director of Manitoba Mineral Resources. We have replaced 100% of the guides on the shaft and approximately 55% of the track replacement has been completed (approximately 1,500 ft). Additional infrastructure included a new underground shop and new gear storage cut-outs, which are approximately 80% complete. We initiated testing of narrow vein long hole design to reduce dilution. We also received initial metallurgical testing results on existing tailings which indicate the tailings can be processed through the existing mill flow sheet.

Webcast and Conference Call

Klondex will report its financial results for the first quarter of 2016 after market close on Tuesday, May 10, 2016. A conference call and webcast will be held the following morning on Wednesday, May 11, 2016 at 10:30am ET/7:30am PT. The conference call telephone numbers are listed below.

Klondex is a well-capitalized, junior-tier gold and silver mining company focused on exploration, development, and production in a safe, environmentally responsible, and cost-effective manner. The Company has 100% interests in two producing mineral properties: the Fire Creek Mine and the Midas Mine and ore milling facility, both of which are located in the state of Nevada, USA, as well as the recently acquired Rice Lake mine and mill in Manitoba, Canada.

This news release contains certain information that may constitute forward-looking information or forward-looking statements under applicable Canadian and U.S. securities legislation (collectively, "forward looking information"), including but not limited to information about current expectations on the timing and success of exploration and development activities, the timing and success of mining operations, the Company's ability to produce and sell gold and silver, the Company’s achievement of the full-year projections for ounce production, metal grades and production costs, the Company's ability to meet annual operations estimates, the ability to maintain average daily milling rates, the Company's capital addition expenditures, the Company's intention and ability to monetize mineralized material, the results of economic studies regarding the Company's mineral projects, the Company's financial conditions, the successful execution and project development at all of the Company's mines and projects, and related permitting. This forward-looking information entails various risks and uncertainties that are based on current expectations, and actual results may differ materially from those contained in such information. These uncertainties and risks include, but are not limited to, the strength of the global economy; the price of gold and silver; operational, funding and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations; and the ability of Klondex to fund its substantial capital requirements and operations. Risks and uncertainties about the Company's business are more fully discussed in the Company's disclosure materials filed with the securities regulatory authorities in Canada and United States available at www.sedar.com and www.sec.gov, respectively. Readers are urged to read these materials. Klondex assumes no obligation to update any forward-looking information or to update the reasons why actual results could differ from such information unless required by law.

Technical Information

Scientific and technical information in this press release has been reviewed and approved by Brian Morris, a "qualified person" within the meaning of NI 43-101.

Non-IFRS Performance Measures

We have included the non-IFRS measures "Production cash costs per gold equivalent ounce sold", “All‐in sustaining costs per gold ounce sold”, and "All-in costs per gold ounce sold" in this press release (collectively, the "Non-IFRS Measures"). These Non-IFRS Measures are used internally to assess our operating and economic performance and to provide key performance information to management. We believe that these Non-IFRS Measures, in addition to conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate our performance and ability to generate cash flows required to fund our business. These Non-IFRS Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These Non-IFRS Measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to or consistent with measures used by other issuers or with amounts presented in our financial statements.

Our primary business is gold production and our future development and current operations primarily focus on maximizing returns from such gold production. As a result, our Non-IFRS Measures are calculated and disclosed on a per gold ounce basis.

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